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Member States Reach Accord on New Anti-dumping Rules

19 May 2017

On 3 May 2017, EU Member States finally managed to reach a political compromise on a new methodology to combat dumping. The new anti-dumping methodology is aimed at detecting and redressing distortions on the EU market resulting from state intervention in non-EU countries, in particular mainland China.

According to the EU, ensuring that imported products are sold on the EU market at a fair and equitable price will ultimately result in the protection of jobs and enhanced competitiveness on the EU market.

The EU Member States approved the Council's negotiating position on a new and country-neutral methodology for assessing market distortions in third countries. The Council’s position, to a large extent, reflects the principles put forward in the European Commission’s proposal which was presented on 9 November 2016. This proposal was submitted so as to make the EU’s trade defence instruments (TDIs) compatible with the new rights that mainland China obtained within the context of the WTO in December 2016.

Importantly, the Council's position establishes a non-exhaustive list of examples for the European Commission to identify significant market distortions, in the course of an anti-dumping investigation. This list includes elements such as state policies and influence, the widespread presence of state-owned enterprises, discrimination in favour of domestic companies, the financial sector’s lack of independence and the inadequate enforcement of bankruptcy, corporate or property laws.

While it will, under the new EU rules, still be possible for EU companies to file dumping complaints (as is currently the case), the EU industry will be able to rely on new country-specific assessment reports of the European Commission to support their case.

In a scenario in which the European Commission detects a significant market distortion in an exporting country, it will be able to correct such distortion by setting a price for the concerned product by reference to, on the one hand, the costs of production and sale prices in a country with similar levels of economic development, or, on the other hand, appropriate undistorted international costs and prices. This methodology will logically lead to the imposition of higher anti-dumping duties.

The Council’s agreement on the new anti-dumping methodology was made possible after EU governments struck a compromise with Italy which had, only last month, threatened to vote against the new methodology. Italy – and other like-minded EU Member States allied with it – demanded amendments to the Commission’s proposal in order to grant EU investigators more leeway to impose higher duties.

During the last few weeks, Italy used diplomatic pressure to win backing for its proposal to toughen the EU’s stance on dumping from non-market economies. Under the achieved compromise, the list of market distortions that can trigger higher anti-dumping duties was extended. Amongst others, the criterion of discriminatory application or inadequate enforcement of bankruptcy, corporate or property laws as a significant distortion was added due to pressure from Italy.

The Council’s negotiating position was forwarded to the EU’s trade ministers, which discussed the position at their meeting on 11 May 2017. As the proposal is subject to the EU’s ordinary legislative procedure, the Council and the European Parliament need to reach an agreement on a final text of the new methodology before it can enter into law. In order to reach such agreement, the EU Member States asked Malta, the current holder of the EU presidency, to open negotiations with the European Parliament.

In the meantime, Salvatore Cicu – an Italian member of the European Parliament who is in charge of drafting the European Parliament’s position on the new EU anti-dumping methodology – is lobbying for a more powerful role for EU lawmakers. According to Cicu, EU lawmakers should have the power to prompt trade officials to reassess whether certain countries or industries are competitive. During a debate in the European Parliament, Cicu stated that “if there is a change in circumstances in a particular country or sector, the Parliament will be authorised to call upon the European Commission to update the reports to reflect the new situation”.

Cicu’s position is, however, not followed by all EU institutions. In the European Commission proposal, the Commission decided to keep the power to determine whether serious distortions exist in a third country to itself; the liberal grouping within the European Parliament tends to agree with this approach.

In addition, many lawmakers have emphasised the need of the new EU anti-dumping methodology to be consistent with the EU’s obligations under the WTO. Doubts with regard to such WTO consistency have repeatedly arisen. During a meeting at the WTO on 27 April 2017, mainland China, Russia, Indonesia and Kazakhstan argued that the EU is merely replacing the concept of non-market economy designation with the concept of significant distortion. According to these countries, the concept of significant distortion will have the same discriminatory effect as the currently applicable non-market economy designation.

As soon as the European Parliament determines its own negotiating position, which is expected to be done at the meeting of the European Parliament's Committee on International Trade (INTA) on 20 June 2017, the "trilogue" discussions will be able to commence. A plenary vote within the European Parliament will then take place in early July.

Hong Kong traders should be aware that the EU’s new anti-dumping methodology runs in parallel with a separate negotiating process on the broader modernisation of the EU’s TDIs, which has been ongoing since 2013. More changes are thus expected in the course of 2017.